Update on FERC John P P. Hugh ghes es President & & CEO - - PowerPoint PPT Presentation

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Update on FERC

John P

• P. Hugh

ghes es President & & CEO EO Electr tricity C Consumer ers R Resource C e Council Washington D DC

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DOE NOPR

• Under section 403 of the DOE Act, DOE directed FERC
• n September 29, 2017 to initiate a rulemaking that

would provide cost of service compensation to power plants that can store 90 days of fuel onsite.

• The intension was to bailout uneconomic coal-fired and

nuclear plants that were at risk of retirement.

• This clear cut example of crony capitalism created a

firestorm of opposition.

• ELCON worked with a broad coalition of national

energy-related trade associations to fight the proposal.

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Fake Issue: Grid Resilience

• There is no evidence demonstrating that RTOs/ISOs need to

subsidize resources with 90 days of on-site fuel in order to maintain reliable service during severe weather events or

• therwise.
• The proposed rule focuses on regions with the highest share
• f coal and nuclear generation (PJM and MISO) while

ignoring the regions with very little such generation, which makes little sense if such resources were actually critical for reliability and resilience.

• Based on 2016 conditions, the cost of out-of-market

payments for providing all eligible resources with ongoing costs and a return on investment would likely range from $3.7 billion to $11.2 billion per year.

Source: Evaluation of the DOE’s Proposed Grid Resiliency Pricing Rule, Prepared by The Brattle Group, October 2017 4

FERC Reaction

• In January 2018, FERC rejected the DOE proposal

arguing that the record was insufficient in showing that existing ISO/RTO tariffs were no longer just and reasonable.

• It initiated a new proceeding directing ISOs and RTOs to

evaluate the resilience of their grids.

• The submissions were filed in March 2018 and not one

identified a resiliency problem associated with retiring coal-fired or nuclear power plants.

• Stakeholders were allowed to file “reply comments” on

the ISO/RTO filings in May.

• FERC action (if any) is pending. Needs three votes.

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DOE Power Subsidy Plan

• On March 29th, FirstEnergy Solutions – FirstEnergy’s now

bankrupt merchant generator subsidiary – petitioned DOE to declare a “grid emergency” under section 202(c) of the Federal Power Act and provide compensation to coal-fired and nuclear power plants.

• The proposal met with some initial opposition within DOE.
• PJM (where most of the troubled plants are located) filed a letter

with DOE stating that no such emergency existed.

• It is rumored that the White House ordered a subsidy plan under

the pretext of national security.

• There is now active consideration of invoking the Defense

Production Act of 1950 (DPA) and section 202(c) to bailout the plants.

• National Security Council reviewed the proposal on June 1st and

later that day POTUS directed DOE to act.

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The Directive

DOE is exercising its DPA and FPA authority by directing System Operators (as defined in the Directive), for a period of twenty-four (24) months, to purchase or arrange the purchase

• f electric energy or electric generation capacity from a

designated list

• f

Subject Generation Facilities (SGFs) sufficient to forestall any further actions toward retirement, decommissioning, or deactivation of such facilities during the pendency of DOE’s Order. DOE also is directing SGFs outside

• f the RTO/ISO territories to continue generation and delivery
• f electric energy according to their existing or recent

contractual arrangements with Load-Serving Entities. DOE’s Order establishes a Strategic Electric Generation Reserve (SEGR) to promote the national defense and maximize domestic energy supplies. This prudent stop-gap measure will allow the Department further to address the Nation’s grid security challenges while the Order remains in force.

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Primary Frequency Response (PFR)

• PFR is an ERS, needed to ensure system reliability and

stability in both real-time operations and also during system restoration events.

• It is the first stage of interconnection-wide frequency

control needed to prevent Under Frequency Load Shedding(UFLS) and to prevent equipment damage.

• It is provided automatically by unit governors or

equivalent speed control systems.

• Its response is in seconds and not controlled by any

centralized authority.

• It is critical for controlling frequency in system

restoration event.

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FERC PFR NOPR

Docket No. RM16-6-000

• Issued by FERC on November 17, 2016
• Requires all new small and large generators to install

and enable primary frequency response capability

• Applies to synchronous and non-synchronous resources
• Specifies governor or equivalent controls to be
• perated with maximum 5% droop and ±0.036 Hz dead

band settings

• Requires timely and sustained response to frequency

deviations

• Would prohibit any controls that override governor

response

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ELCON Response

• CHP units that are “sized to the load” generally cannot

comply with this mandate. During any frequency event, the equipment’s responsibility is to protect itself and the steam host and not try to bailout the utility outside the fence. Hence the mandate will discourage new CHP.

• FERC was urged to adopt a market-based solution, i.e.,

establish a PFR market that provides compensation for the service and lets generators opt in.

• In a February 2018 order, FERC approved the NOPR but

granted ELCON’s request for a limited exemption.

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Electric Storage

• Electric storage has often been described as the

“holy grail” or “Swiss Army knife” of the grid.

• The technology has been victimized by regulatory

policies and tariffs that are generator centric.

• FERC has hosted a series of inquiries in an attempt

to identify discriminatory practices that act as barriers to adoption of this technology.

• In February, FERC issued an order directing ISOs

and RTOs to remove barriers to the participation of electric storage resources in their capacity, energy and ancillary services markets.

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Distributed Energy Resources

• FERC has been attempting to remove barriers to market

participation by aggregators of distributed energy resources.

• The issue was initiated as part of the rulemaking on electric

storage—but was never acted on in the final order. FERC staff was directed to research the issue and host a technical

• conference. A detailed staff report was released in February

and a technical conference was held April 10-11.

• The issue is very complex. There is considerable opposition

to allowing aggregated retail load in wholesale markets. There are also some technical concerns related to locational pricing and dispatch.

• Stay tuned.

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Other FERC Issues

• In March, FERC initiated an inquiry on the effect of

the Tax Cuts and Jobs Act on its jurisdictional rates (electric transmission and oil and gas pipelines). It also issued “show-cause orders” to 48 utilities directing them to revise their tariffs to conform with the lower tax rate.

• In April, FERC issued final rules to improve the

transparency of ISO/RTO markets related to the use

• f uplift payments. Uplift refers to a payment that a

grid operator makes to a resource when market revenues are insufficient to cover the resource’s

• perating costs.

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For more information, visit www.elcon.org